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Microcap & Penny Stocks : CCEE Breaking Out -- Ignore unavailable to you. Want to Upgrade?

To: james reinhart who wrote (7490)	10/30/1997 3:03:00 AM
From: Rick	Respond to of 12454

Smaller investors getting ripped off, Senate panel told WASHINGTON (September 22, 1997 1:27 p.m. EDT) -- Senate investigators are delving into the slippery world of stock fraud, examining abuses in the penny-stock market estimated to rob ordinary investors of $6 billion a year. At the same time, the Securities and Exchange Commission and state securities regulators issued a "cold-calling alert" Monday, warning consumers to hang up on aggressive brokers selling investments over the telephone. The long-running bull market has drawn multitudes of eager new investors but also has created more victims of rogue brokers' aggressive stock schemes and unauthorized trading on accounts, securities regulators say. ***************** In May, regulators in 20 states began a crackdown against 14 brokerage firms accused of fraudulent sales practices. And the FBI has been working with securities regulators to investigate stocks of 19 small companies allegedly manipulated by organized crime. ******************************** A Senate investigative subcommittee is looking into the problem and also is trying to put a human face on stock fraud, which often involves low-priced shares of high-risk stocks that are thinly traded. Besides summoning top regulators to testify at a hearing Monday, investigators are hearing first-hand from some small investors who allegedly were bilked. Many victims of such fraud are elderly. SEC Chairman Arthur Levitt Jr. is directing the agency's enforcement officials to help the Justice Department and local law enforcement authorities in prosecuting more stock fraud cases. "We have stepped up both our civil and criminal enforcement efforts -- we are working with criminal (law enforcement) authorities as never before to lock up bad brokers and deter wrongdoers," Levitt said in testimony prepared for delivery at the hearing. ********************* He said the SEC also is looking to close loopholes in the rules governing the penny-stock market and is focusing more attention on unscrupulous brokerage firms, not only individual brokers. ***************** The subcommittee investigation "will underscore for the American people the growing problem of fraud in the sale of small-company stocks, a truly pernicious undercurrent in ... our nation's robust financial markets," said Sen. Susan Collins, R-Maine, chairman of the Senate permanent subcommittee on investigations. She cited regulators' estimates that investors are being defrauded of some $6 billion annually -- three times the peak amount during the 1980s before enactment of the Penny Stock Reform Act of 1990. ******************* That law resulted from an epidemic of penny-stock fraud during the last decade. Then as now, rogue brokers often used high-pressure sales tactics over the telephone and the Internet, pushing up stock prices, then dumping their own shares, sending prices abruptly and sharply lower. ********************* Among the reforms was the requirement that brokers obtain signed releases from new buyers of penny stocks before transactions are made. The subcommittee is examining recent enforcement efforts by the SEC, state securities regulators and a self-policing organization for securities dealers. To that end, the panel also invited as witnesses Joseph Borg, director of the Alabama Securities Commission; Barry Goldsmith, executive vice president of NASD Regulation, the self-policing arm of the National Association of Securities Dealers; and David Hausman, counsel to the Ontario Securities Commission in Canada. Also among the witnesses: Helen Sprecher, 85, of Philadelphia; Louis Poggi, a delivery-truck driver from Pembroke, N.H., and Emile Murnan of St. Louis. Brokers at now-defunct Investors Associates Inc., based in Hackensack, N.J., allegedly defrauded Mrs. Sprecher of about $60,000. She has said the money represented 90 percent of the funds saved by her and her husband from a neighborhood grocery store they owned for 40 years. Poggi also has accused Investors Associates, saying they caused him to lose $10,000, all of his savings. An Investors Associates attorney disputes the claims of both Mrs. Sprecher and Poggi, saying they greatly exaggerated the amounts of their alleged losses. The firm paid Poggi at least $3,000 to cover all his losses and Mrs. Sprecher turned down an offer of $6,500 to $7,500 that would have covered hers, Lawrence R. Gelber, counsel for Investors Associates, said in a telephone interview. The firm said previously that it "has never condoned any improper sales practice."